{"id":1010,"date":"2021-12-29T03:53:09","date_gmt":"2021-12-29T03:53:09","guid":{"rendered":"https:\/\/uk.legalvision.com.au\/?p=1010"},"modified":"2025-07-02T00:42:27","modified_gmt":"2025-07-01T23:42:27","slug":"duties-of-a-commercial-trustee","status":"publish","type":"post","link":"https:\/\/legalvision.co.uk\/business-structures\/duties-of-a-commercial-trustee\/","title":{"rendered":"Duties of a Commercial Trustee in England and Wales"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">Are you the trustee of a commercial trust? Perhaps you are in a partnership and hold the legal title for partnership property. You may even be an unwitting trustee, such as if you have taken your customers\u2019 money before they receive their goods or borrowed a loan for a specific purpose. In that case, it is vital to understand your duties and responsibilities as a commercial trustee.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This article will first explain the general concepts behind commercial trusts and what certain terms mean. It will then list the key duties and certain powers.<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Key Concepts<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Trusts can be a confusing area of law, even for lawyers. We explain some key terms below.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Trust Instrument vs Implied Trusts<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">A trust instrument is a document that outlines the creation of the trust. It will:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">outline the terms of the trust;<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">detail who the beneficiaries are; and\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">explain how the trust is to be managed.\u00a0<\/span><\/li>\n<\/ul>\n<div class=\"box box--icon box--info\">\n<p><span style=\"font-weight: 400;\">Investment trusts, certain pension plans, and collective investment schemes will all have their own trust instrument.<\/span><\/p>\n<\/div>\n<p><span style=\"font-weight: 400;\">In a commercial context, trusts can also arise automatically in certain circumstances. These are called \u201cimplied trusts\u201d because the law will imply a trust when certain circumstances are met, including:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">bankruptcy and insolvency;<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">some kinds of customer prepayments;<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">the supply of goods under credit;<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">ownership of partnership property; and<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">lending money for an expressly stated purpose.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Where there is an implied trust, and you are the trustee, the law will hold you to the same standards as someone who has expressly agreed to act as a trustee.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Beneficiaries<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">The beneficiaries are the individuals that stand to benefit from the trust. Some common examples:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">employees to an employee pension plan;<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">investors that have contributed to certain kinds of investment funds;<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">customers that prepaid for the supply of goods in certain circumstances; and<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">lenders that have lent money for a specific purpose.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Though beneficiaries ultimately stand to gain something from the trust, crucially, they do not own the trust property. Instead, as a trustee, you are the legal owner. In general, this means you have the power to transfer, sell, or purchase on behalf of the trust. But as the saying goes, with such power comes significant responsibilities.<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Duties of a Trustee<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">A commercial trustee will have several duties that they must follow when managing trust property. We explore these duties below.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">A Fiduciary Duty<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">The relationship between a trustee and a fiduciary is one of the closest relationships the law recognises. As legal owners of the trust property, trustees can act as if the property was their own. This is why it is very easy for a trustee to act dishonestly. As a result, the law imposes a fiduciary duty on the trustee.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">A fiduciary duty is a special kind of relationship between certain groups of people. Where there is a fiduciary duty, the fiduciary (you as a trustee) must act in the utmost good faith towards the person you owe the duty to (the beneficiaries). Your own personal interests must never, under any circumstances, interfere with this duty.<\/span><\/p>\n<div class=\"box box--icon box--info\">\n<p><span style=\"font-weight: 400;\">This relationship underpins the entirety of your position as a trustee. Indeed, you can think of it as a general duty to always act with the beneficiary\u2019s best interests in mind. <\/span><\/p>\n<\/div>\n<p><span style=\"font-weight: 400;\">This means you must never:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">enter into competition with the trust; and<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">make any \u201cincidental\u201d profit from the trust (other than what you may be allowed to pay yourself for your services as a trustee), including using any information you gained from the trust to benefit personally.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">For the latter, this applies even if you acted with good intentions or did not intend to breach your fiduciary duty. This is known as strict liability. The law will not hear any excuses.\u00a0\u00a0<\/span><\/p>\n<div class=\"box box--warning box--icon\">\n<p><span style=\"font-weight: 400;\">If you breach your fiduciary duty, the court has broad powers to order you to pay any profit back to the trust. In addition, if the trust property (i.e. its money) has disappeared, the court can \u201ctrace\u201d the money and recover it from other assets.<\/span><\/p>\n<\/div>\n<h3><span style=\"font-weight: 400;\">Specific Duties<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Apart from the fiduciary duty you owe to beneficiates, there are several other key duties to note. We outline these specific duties in the table below.<\/span><\/p>\n<table class=\"lv-table lv-table--style-1\" style=\"border-collapse: collapse; width: 100%;\" border=\"0\" cellspacing=\"0\" cellpadding=\"0\">\n<tbody>\n<tr style=\"height: 23px;\">\n<td style=\"width: 22.2619%; height: 23px;\"><strong>A duty to&#8230;<\/strong><\/td>\n<td style=\"width: 77.7381%; height: 23px;\"><strong>Explanation<\/strong><\/td>\n<\/tr>\n<tr style=\"height: 138px;\">\n<td style=\"width: 22.2619%; height: 138px;\">Invest<\/td>\n<td style=\"width: 77.7381%; height: 138px;\">\n<p>This duty is relevant where the trust holds a sum of money. This money must be put to work, either to grow (\u201ccapital appreciation\u201d) or to produce income (\u201cdividend payments\u201d).<\/p>\n<p>This is an important duty. Notably, there are a lot of rules as to what constitutes a good investment versus a bad one.<\/p>\n<\/td>\n<\/tr>\n<tr style=\"height: 65px;\">\n<td style=\"width: 22.2619%; height: 65px;\"><span style=\"font-weight: 400;\">Act personally and not passively<\/span><\/td>\n<td style=\"width: 77.7381%; height: 65px;\"><span style=\"font-weight: 400;\">If you are a trustee, you must take an active role in the management and administration of the trust. If you fail to prevent another trustee from doing something unlawful (such as stealing trust property), you can be held liable for your failure to act.<\/span><\/td>\n<\/tr>\n<tr style=\"height: 44px;\">\n<td style=\"width: 22.2619%; height: 44px;\"><span style=\"font-weight: 400;\">Observe the terms of the trust<\/span><\/td>\n<td style=\"width: 77.7381%; height: 44px;\"><span style=\"font-weight: 400;\">Where there is a trust instrument, you must follow the rules it lays down.<\/span><\/td>\n<\/tr>\n<tr style=\"height: 44px;\">\n<td style=\"width: 22.2619%; height: 44px;\"><span style=\"font-weight: 400;\">Act impartially between beneficiaries<\/span><\/td>\n<td style=\"width: 77.7381%; height: 44px;\"><span style=\"font-weight: 400;\">You must not show favouritism towards one beneficiary at the other beneficiaries\u2019 expense.<\/span><\/td>\n<\/tr>\n<tr style=\"height: 23px;\">\n<td style=\"width: 22.2619%; height: 23px;\"><span style=\"font-weight: 400;\">Act unanimously<\/span><\/td>\n<td style=\"width: 77.7381%; height: 23px;\"><span style=\"font-weight: 400;\">Where there is more than one trustee, all trustees must agree to reach the same decision.<\/span><\/td>\n<\/tr>\n<tr style=\"height: 23px;\">\n<td style=\"width: 22.2619%; height: 23px;\"><span style=\"font-weight: 400;\">Exercise reasonable care and skill<\/span><\/td>\n<td style=\"width: 77.7381%; height: 23px;\">Th<span style=\"font-weight: 400;\">e standard is \u201cthe prudent man of business\u201d. That means that you must act as would any sensible person in the commercial world would.<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<div class=\"box box--icon box--info\">\n<p><span style=\"font-size: revert;\">Note that trustees will also have some powers. However, this is beyond the scope of this article. 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If you <a href=\"https:\/\/legalvision.co.uk\/corporations\/breaching-trustee-duties\/\">breach a trustee duty<\/a>, you can be held civilly liable. Likewise, the court can order you to repay the trust from your own personal assets. This applies even if you did not intend to breach your duties. You may also face criminal liabilities in certain circumstances.\u00a0<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Key Takeaways<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">As a commercial trustee, you have lots of duties because you hold the legal title to trust property. The law imposes lots of obligations on a trustee to protect the beneficiaries. Apart from their fiduciary duties, commercial trustees have a duty:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">to act independently and in unison with other trustees;<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">to invest the trust property; and<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">not to prejudice any beneficiary.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Failure to abide by these duties can result in civil and criminal liability. The court has broad powers to come after your personal assets in the event of certain breaches.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">If you need help with commercial trusts, our <\/span><a href=\"https:\/\/legalvision.co.uk\/business-lawyers-lp\"><span style=\"font-weight: 400;\">experienced business lawyers<\/span><\/a><span style=\"font-weight: 400;\"> can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on <a href=\"tel:+448081968584\" class=\"AVANSERnumber dynamic-number\">0808 196 8584<\/a> or visit our <\/span><a href=\"https:\/\/legalvision.co.uk\/membership\"><span style=\"font-weight: 400;\">membership page<\/span><\/a><span style=\"font-weight: 400;\">.\u00a0<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Frequently Asked Questions<\/span><\/h2>\n\n\n<div class=\"schema-faq wp-block-yoast-faq-block\"><div class=\"schema-faq-section\" id=\"faq-question-1640749399513\"><strong class=\"schema-faq-question\"><strong>What duties do I owe as a commercial trustee?<\/strong><\/strong> <p class=\"schema-faq-answer\">Duties you owe as a trustee include a fiduciary duty, a duty to invest trust property, a duty to observe the terms of the trust instrument, a duty to act impartially between beneficiaries, a duty to act unanimously, and a duty to exercise reasonable care and skill.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1640749418648\"><strong class=\"schema-faq-question\"><strong>What happens if I breach my duties?<\/strong><\/strong> <p class=\"schema-faq-answer\">The law holds trustees to a high standard. A court can hold you civilly and criminally liable for breaches of certain duties. Likewise, a court can come after your personal assets to recover any loss to the trust which you caused.<\/p> <\/div> <\/div>\n<div class=\"not-prose m-feedback-prompt\">\n    <!-- Thumbs up\/down bar -->\n    <div class=\"m-feedback-prompt__main\">\n        <div class=\"m-feedback-prompt__title\">Was this article helpful?<\/div>\n        <div>\n            <!--span class=\"m-feedback-prompt__button--text\">Thanks!<\/span-->\n            <button type=\"button\" class=\"m-feedback-prompt__button m-feedback-prompt__button--yes\"\n                    data-analytics-link=\"feedback-prompt:yes\" aria-label=\"Agree\">\n                <i class=\"fa-regular fa-thumbs-up fa-3x\"><\/i>\n            <\/button>\n            <button type=\"button\" class=\"m-feedback-prompt__button m-feedback-prompt__button--no\"\n                    data-analytics-link=\"feedback-prompt:no\" aria-label=\"Disagree\">\n                <i class=\"fa-regular fa-thumbs-down fa-3x\"><\/i>\n            <\/button>\n        <\/div>\n    <\/div>\n\n    <!-- Feedback form -->\n    <div class=\"m-feedback-prompt__form\">\n        <div class=\"m-feedback-prompt__form--thanks \">\n            <div>Thanks!<\/div>\n            <p>\n                We appreciate your feedback \u2013 your submission has been successfully received.            <\/p>\n        <\/div>\n        <form id=\"contact-form\" class=\"m-feedback-prompt__form--form\" action=\"\" method=\"post\">\n            <input type=\"hidden\" id=\"authenticity_token\" name=\"authenticity_token\" value=\"9eb4f72322\" \/><input type=\"hidden\" name=\"_wp_http_referer\" value=\"\/api\/wp\/v2\/posts\/1010\" \/>            <input value=\"https:\/\/legalvision.co.uk\/business-structures\/duties-of-a-commercial-trustee\/\" type=\"hidden\" name=\"currenturl\"\n                   id=\"currenturl\">\n            <input value=\"Duties of a Commercial Trustee in England and Wales\" type=\"hidden\" name=\"currenttitle\"\n                   id=\"currenttitle\">\n            <label>\n                <!-- display on thumbs-up -->\n                <span class=\"m-feedback-prompt__feedback m-feedback-prompt__feedback--yes\">\n                    Can you tell us <span class=\"font-semibold\">why<\/span> you found it helpful?\n                <\/span>\n\n                <!-- display on thumbs-down -->\n                <span class=\"m-feedback-prompt__feedback m-feedback-prompt__feedback--no text-lg\">\n                    How can we better improve this article?\n                <\/span>\n                <textarea name=\"feedbackmessage\" id=\"feedbackmessage\" required><\/textarea>\n            <\/label>\n\n            <div class=\"m-feedback-prompt__form--error\" id=\"form-submit-error\"><\/div>\n            <button id=\"submit-contact-form-button\" type=\"submit\" name=\"commit\" class=\"m-feedback-prompt__form--submit\"\n                    data-analytics-link=\"feedback-prompt:submit\">\n                Submit            <\/button>\n        <\/form>\n    <\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Are you the trustee of a commercial trust? Perhaps you are in a partnership and hold the legal title for partnership property. You may even be an unwitting trustee, such as if you have taken your customers\u2019 money before they receive their goods or borrowed a loan for a specific purpose. In that case, it<a href=\"https:\/\/legalvision.co.uk\/business-structures\/duties-of-a-commercial-trustee\/\">Continue reading <span class=\"sr-only\">&#8220;Duties of a Commercial Trustee in England and Wales&#8221;<\/span><\/a><\/p>\n","protected":false},"author":13461,"featured_media":657,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_relevanssi_hide_post":"","_relevanssi_hide_content":"","_relevanssi_pin_for_all":"","_relevanssi_pin_keywords":"","_relevanssi_unpin_keywords":"","_relevanssi_related_keywords":"","_relevanssi_related_include_ids":"","_relevanssi_related_exclude_ids":"","_relevanssi_related_no_append":"","_relevanssi_related_not_related":"","_relevanssi_related_posts":"173381,2168,3828,1001,2104,1719","_relevanssi_noindex_reason":"","editor_notices":[],"footnotes":""},"categories":[36],"tags":[88,143,144,145,146,147],"class_list":["post-1010","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-structures","tag-trust-deed","tag-commercial-trustee","tag-fiduciary-duties","tag-trust-instrument","tag-breach-of-duty","tag-commercial-trust"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.1.1 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Duties of a Commercial Trustee in England | LegalVision UK<\/title>\n<meta name=\"description\" content=\"Are you the trustee of a commercial trust? 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